Centamin depleting reserves at Sukari

Centamin’s (TSX: CEE) recent acquisition attempt on Australian junior Ampella Mining (ASX: AMX) has been given more context with the release of the latest reserve estimate from its flagship Sukari gold mine in Egypt.

Reserves at the mine are down 19% from its last resource calculation and that situation is providing extra motivation for the company to find new resources, which it hopes to do with an acquisition of Ampella and its gold assets in Burkina Faso and Cote d’Ivoire.

Combined open pit and underground reserves at Sukari now come in at 230.1 million tonnes grading 1.11 grams gold for 8.2 million oz. of gold. The previous reserve estimate, which was released at the end of 2011, tallied 277 million tonnes of proven and probable reserves grading 1.13 grams for 10.1 million oz. of gold.

Centamin blames the decrease not only on mining depletion but also increased mining and processing costs. Those costs rose significantly after it was forced to switch to paying international fuel prices instead of the subsidized price it had been paying.

There was, however, at least a modicum of positive momentum within the measured and indicated category as resources there grew by 2%.

Open pit measured and indicated resources now stand at 385.4 million tonnes grading 1.02 grams gold for 12.64 million oz. while inferred come in at 39.5 million tonnes grading 1.1 grams for 1.4 million oz. of gold.

Sukari also has underground measured and indicated resources of 4.3 million tonnes grading 6.1 grams gold for 844,000 oz. of gold and underground inferred resources of 2.9 million tonnes grading 5.2 grams gold for 489,000 oz. of gold.

The company says it is continuing with resource and reserve definition as it expands its underground infrastructure at the mine. The increased capex at the underground portion of the mine will give it access to higher grades — the average grade of underground reserves is 7.2 grams gold — which should drive higher cash flows in the future.

Centamin maintained its full-year production guidance of 320,000 oz. of gold with cash costs of US$700 per oz. BMO Capital Markets analyst David Haughton expects both of those numbers to be higher as he forecasts production of 341,000 oz. at cash costs of US$710 per oz.

Haughton has the company’s stock rated as ‘market perform’ with a 95¢ target price.

In Toronto on Dec. 18 the Centamin’s stock was flat at 71¢ on 70,000 shares traded.